Timothy C. Pfeifer, FSA, MAAA Pfeifer Advisory LLC April 8, Life Insurance Conference

2  Life Insurance only, not annuities  Structuring life insurance product design for success in a fluctuating interest rate environment  Emphasis on new business sales, though nothing happens in a vacuum Succeeding in a Fluctuating Interest Rate Environment

Variable UL Indexed UL Term Products Group Life Line Combo Features Non-Participating Whole Life Guaranteed UL Accumulation-Oriented UL Current Assumption UL 3 Succeeding in a Fluctuating Interest Rate Environment More Emphasis on Less Interest-Oriented Products De-emphasize Interest-Oriented Products

4 Succeeding in a Fluctuating Interest Rate Environment Configuring the load structure on Universal Life to balance interest, expense, and mortality margins Broad contractual language permitting changes in policy non-guaranteed elements, along with expansive definitions If feasible, structure participating versions of products to take advantage of dividend flexibility Share interest rate risk elements with reinsurer or investment partner Construct investment portfolios with some ability to re-allocate in the face of interest rate movements

Products built with small interest margin requirements balanced against products with larger interest margin requirements Products which compete relatively better in rising rate scenarios versus falling rate scenarios Explicit macro hedging Purchase alternative assets less exposed to interest rate fluctuations (e.g., natural resources) Perform “Product Hedging” at a product portfolio level, and within a product type Reduce policyholder liquidity options for some products Lower guaranteed interest, raise guaranteed expense loads, constrict some premium flexibility Add direct interest-linked products to the portfolio (e.g., credited rate is a function of yield curve)

Seek Down Market Opportunities Distribution Control and Education Pricing with Future Bias as to Interest Rate Movements 6 Relative Risk Weighting Between Equity and Interest Rate Risk Inforce versus New Business Competitiveness

Timothy C. Pfeifer, FSA, MAAA